DIRECTORS' REPORT To, The Members, Your Directors have pleasure in presenting the 28th Annual Report of the Company together with the Audited Accounts for the year ended 31st March, 2015. Operating Results: Dividend: Considering the turnaround in Company's performance, your Board of Directors pleased to recommend payment of dividend of Rs. 0.10 paisa per equity shares of Rs. 1/-each (i.e.,10% of the paid up Capital) for the financial year 2014-15 for your consideration and approval at the ensuing Annual General Meeting. The dividend outgo would be Rs. 187.65 lakhs (including dividend distribution tax). Performance: In a challenging market environment, your Company recorded its highest revenue of Rs. 771.47 crores during the year under review as against Rs. 655.18 crores achieved in the previous year, showing a growth of 18%. One of the main reasons for this has been the availability of the damaged Block 5 during the year under review. This has resulted in growth in both domestic and export sales. Further, opening up new export markets for formulations and expanding product range has also contributed to the growth. The EBIT and Cash profit stood at Rs. 45.41 Crores and Rs.35.14 Crores during the year under review, compared to Rs. 7.92 crores and Rs. 1.81 Crores respectively in the previous year. The increase in finance cost is mainly due to increase in working capital requirements. Domestic & Export Markets: Although the country received near normal rainfall (94% of LPA) during the second quarter, however due to the large rainfall deficiency in June, the 2014 season rainfall over the country as a whole (88% of LPA) ended as deficient (<90% of LPA). The large temporal and spatial variation in the rainfall during the season had adverse impact on the productivity and production of major kharif crops over the country except rice. The Rabi season has not been good for the second year consecutively due to insufficient rain fall. This has impacted sales in some of the southern states. This has resulted in buildup of inventories in the field. This had an adverse impact on agrochemical market conditions. Despite of the above your Company achieved 9% growth in domestic sales, increasing from Rs. 541.00 crores in the previous year to Rs. 590.00 crores in the year under review. This growth is mainly attributable to the expanded market area and crop, product portfolio, supply chain initiatives, production flexibility of Ethakota formulation plant. In the direction of enhancing the product portfolio, your Company launched two new products in the domestic market, a new rice herbicide and, a nematicide during the year under review. Exports have shown significant improvement over the previous year, mainly due to production resumption out of fire affected Block 5 restored during fag end of the previous year, and overall stabilization of the Srikakulam plant. The Exports Sales has increased from Rs. 93.00 crores to Rs. 148.00 crores in the year under review registering a growth of 60%. In the Contract (toll) manufacturing from Srikakulam Unit, your Company has been maintaining continued amicable and good relationships with the Contract manufacturing customers. This has helped the Company restore confidence and enabled to get renewed orders from them. A new product was introduced in the year under review. The contract manufacturing business is expected to grow. In the direction of exploring newer business opportunities by way of direct marketing in other geographies, during the year under review your Company successfully registered and launched few of its own branded products in Asian countries. Your Company is also in process of registering various brand products in African countries towards penetrating those markets. Plant Operations: The operations at Srikakulam technical plant have been satisfactory throughout the year under review, except for a period of about one month in October due to Hudhud cyclone. The plant has achieved an annual production of 4545 MT during the year under review compared to 3177 MT of the previous year. Export orders for some of Block 5 products have been received, enabling to improve the plant utilization considerably. The plant has also lined-up for production of few intermediates for captive consumption and the production will commence during the current financial year 2015-16. Various newer initiatives for cost savings and capacity utilization have been taken up besides regular efforts for streamlining, debottlenecking and augmenting plant efficiencies and enhancing productivity. The working environment has been amicable led to maintaining cordial relationship with workers Unions and other stakeholders. The Ethakota formulation unit was honored with "Best Management Award" for the year by State Government of Andhra Pradesh on 01st May, 2015. This is matter of pride for Company. The unit achieved a production of 19,258 MT/ KL in the year under review comparing to the previous year production of 20,324 MT/KL. This has been due to poor Rabi season. However, the plant could not only meet the domestic demand but also geared up to meet the additional demand from the newer Export markets. Various initiatives in the areas of production volume increase, quality control, automations, increased productivity, debottlenecking and supply chain have been taken to meet the enhanced marketing demand and effective / better customer services. Fire Insurance Claim: During the year under review, the Insurance Company has accepted the Company's provisional insurance claim in respect of damages occurred in the fire affected Block-5 of the Srikakulam plant and an interim on-account payment has been released. The claim made by the Company is in process for settlement. New Projects/Products: The Company's 'State of the art' R & D Centre at Shadnagar, near Hyderabad has been active and strengthened in developing various cost effective process for manufacture of Active Ingredients(AIs)/Technical and Intermediates for Herbicides, Insecticides and Fungicides. One such technical has been commercialized and toll manufactured at Srikakulam technical plant for a multinational Company. Processes for few more technical are also developed successfully. They are at pilot plant stage and are expected to commercialize during the current year. In its efforts to develop new formulations and improving upon the existing processes for better productivity/cost effective, the centre has successfully developed processes for new formulations during the year under review. These are undergoing preliminary field trials. Strategic Alliance: During the year under review, your Company and M/s Helm AG (HELM) a German based Company entered into an agreement which is in the nature of strategic and long term business alliance covering Company's R&D facility, manufacturing facilities, and introduction of HELM products into the Indian market through the Company's marketing network. Environment Protection: During the year under review your Company continued to focus on safety, health and environmental protection at all location with all manufacturing plant mainting at high safety standards. Your Company laid great emphasis on safety in the plant operations and proper environment management. Towards this, Efluent Treatment Plant (ETP) at Ethakota Unit and the Zero Liquid Discharge (ZLD) facility at Srikakulam Unit has been operating satisfactorily. Steps and efforts are in place in the direction of demonstrating constantly improved environmental performance. Both the manufacturing units at Srikakulam and Ethakota has renewed their respectively approvals from the Pollution and Fire Authorities. Your Company continues to enjoy the certifications ISO: 9001:2008, ISO: 140001 and OHSAS: 18001 accredited for its proven standards covering in the areas of Quality, Environment, Safety and Health Management Systems respectively. Transfer of amount to Reserves: The Company does not propose to transfer any amount to the general reserve for the financial year ended 31st March, 2015. Share Capital: The paid up equity share capital as on 31st March, 2015 is X 15.59 crores. There was no public issue, right issue, bonus issue or preferential issue during the year under review. The Company has also not issued any other shares or shares with differential voting rights. It has neither issued employee stock options to its employees. Employee Stock Option Scheme-2015 (ESOS-2015): The Board of Directors ("the Board") of the Company at its meeting held on 07th August, 2015, has approved introduction of the 'Nagarjuna Agrichem Limited Employee Stock Option Scheme-2015' (hereinafter referred to as the "ESOS-2015"), subject to the approval of the Members and complinance of the provisions of the Companies Act, 2013 and Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, as amended and any of its modifications from time to time (the "SEBI Regulations"). The ESOS-2015 is for the limited purpose of extending the options to Key Managerial Personnel and Senior Managerial Personnel in the Company, Holding Company(ies), Subsidiary Company(ies) and Associate Company(ies) both in India and abroad. The said Scheme reserves 11,50,000 equity shares of the Company, to be alloted against stock options to be granted to the eligible employees. Material Changes and Commitments: There have been no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the report Subsidiary Companies and Consolidation of Financial Statements: Pursuant to clause 32 of the Listing Agreement entered with Stock Exchanges(s), along with other applicable provisions of the Companies Act, 2013, and as per Accounting Standard (AS) 21, the Audited Consolidated Financial Statements for the year ended on 31st March, 2015 are provided in this Annual Report. The Company has prepared consolidated financial statements by incorporating the financial statements of its wholly owned subsidiaries M/s. LR Research Laboratories Private Limited and M/s. Nagarjuna Agrichem (Australia) Pty, Ltd (which are yet to commence their operations) with its financial statements on line by line basis. The investments of the Company in Nasense Labs Private Limited, an Associate Company, have been accounted for in these consolidated financial statements under the equity method in accordance with AS 23 - "Accounting for Investments in Associates". The Audited Annual Accounts and related information of Subsidiaries and Associate as applicable will be made available upon request. The Statement required under Section 134 of the Companies Act, 2013 is attached as Annexure - I (as Form AOC-1) to the Directors' Report of the Company. No other Company has become/ceased to be subsidiary or joint venture or associate Company during the financial year. There has been no material change in the nature of the business of the aforesaid Subsidiaries and Associate. The Company has no Subsidiary which can be considered as material within the meaning of clause 49(V)(E) of Listing Agreement. In accordance with the provisions of section 136(1) of the Companies Act, 2013, the following have been placed on the website of the Company www.nagarjunaagrichem.com a) annual report of the Company, containing therein its standalone and the consolidated financial statements; and b) Annual accounts of each of the subsidiary Companies. Directors and Key Managerial Personnel: In accordance with the provisions of Section 152 read with rules made thereunder of the Companies Act, 2013 Mrs. K.Lakshmi Raju, Director of the Company retires by rotation and is eligible for re-appointment. Pursuant to the provisions of the section 149 of the Companies Act, 2013, Mr.D.Ranga Raju, Mr.K.Raghuraman, Mr.N.Vijayaraghavan and Mr.Raghavender Mateti have been appointed as Independent Directors for a period of five years, at the Annual General Meeting of the Company held on 09th August, 2014. Mr. V.Vijay Shankar, Managing Director, Mr. R.K.S. Prasad, Chief Financial Officer and Mr. Satish Kumar Subudhi, Company Secretary & Head-Legal are KMP of the Company in terms of Section 203 of the Companies Act, 2013. In the opinion of the Board, the Independent Directors possess appropriate balance of skills, experience and knowledge, as required. A brief note on Directors retiring by rotation and eligible for re-appointment is furnished in the report on Corporate Governance. Auditors: a) Statutory Auditors: Pursuant to Section 139, 142 and other applicable provisions of the Companies Act, 2013 read with rules made thereunder, the Shareholders in their 27th Annual General Meeting (AGM) of the Company held on 09th August, 2014 appointed M/s. M.Bhaskara Rao & Co., Chartered Accountants, Hyderabad (Firm Registration No. 000459S) as Statutory Auditors of the Company to hold office from the conclusion of the 27th AGM till the conclusion of the 30th AGM subject to ratification of their appointment by Members in every AGM. M/s.M.Bhaskara Rao & Co., have confirmed their eligibility under Section 141 of the Companies Act, 2013 read with rules framed thereunder for appointment as Auditors of the Company. As required under clause 49 of the Listing Agreement, the Auditors also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. The members are requested to ratify the appointment of M/s.M.Bhaskara Rao & Co., Chartered Accountants as Statutory Auditors of the Company and fix their remuneration for the year 2015-16. The notes on financial statements referred to in the Auditors Report are self explanatory and do not call for any further comments. The Auditors Report does not contain any qualification, reservations or adverse remarks or disclaimer. b) Internal Auditors: The Board of Directors of the Company have appointed M/s. Deloitte Touche Tohmatsu India Private Limited, Chartered Accountants, Hyderabad as Internal Auditors to conduct internal audit of the Company for the financial year ended 31st March, 2015 and their reports are reviewed by the Audit Committee from time to time. c) Cost Auditors: M/s. K. Narasimha Murthy & Co., Cost Accountants, Hyderabad have been appointed to conduct cost audits relating to Insecticides (Technical Grade and Formulations), of the Company for the year ending 31st March, 2016. Pursuant to the provisions of Section 148 of the Companies Act, 2013 read with rules made thereunder, Members are requested to consider the ratification of the remuneration payable to M/s. K. Narasimha Murthy & Co., Cost Accountants Hyderabad. The Company has duly filed the Cost Audit Reports for the financial year 2013-14 with the Ministry of Corporate Affairs. d) Secretarial Auditor and Secretarial Audit Report: As per the provisions of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board has appointed Mr. K.V. Chalama Reddy, Practicing Company Secretary, to carry out secretarial audit under the Companies Act, 2013 for the financial year 2014-15. The secretarial audit report issued by Mr. K. V. Chalama Reddy, Practicing Company Secretary in form MR-3 is enclosed to this report as Annexure - II . The report does not contain any qualification, reservation or adverse remark. e) Internal financial control systems and their adequacy: The Company's internal audit systems are geared towards ensuring adequate internal controls commensurate with the size and needs of the business, with the objective of efficient conduct of operations through adherence to the Company's policies, identifying areas of improvement, evaluating the reliability of financial statements, ensuring compliances with applicable laws and regulations and safeguarding of assets from unauthorized use. The Board is of the opinion that the Company's internal financial control are adequate and effective during the financial year 2014-15. Directors' Responsibility Statement: Pursuant to the requirement under Section 134(3)(c) of the Companies Act, 2013, with respect to Directors Responsibility Statement, it is hereby confirmed that: a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanations relating to material departures; b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2015 and of the Profit / Loss of the Company for the year ended on that date. c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) the Directors have prepared the Annual Accounts of the Company on a 'going concern' basis. e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Transfer of Un-claimed Dividend: Pursuant to Section 124 and other applicable provisions of the Companies Act, 2013 as amended from time to time, the following un-claimed dividends were transferred to the Investors Education and Protection Fund during the year under review: a) Unclaimed dividend amount of Rs. 7,50,420/- (Rupees seven lakhs fifty thousand four hundred and twenty only) pertaining to the final dividend for the year 200607; b) Unclaimed dividend amount of Rs. 3,46,536/- (Rupees three lakhs forty six thousand five hundred and thirty six only), pertaining to the interim dividend paid during the year 2007-08; c) Unclaimed dividend amount of Rs. 3,83,460/- (Rupees three lakhs eighty three thousand four hundred and sixty only) pertaining to the interim dividend paid during the year 2007-08; and d) Unclaimed dividend amount of Rs. 4,55,774/- (Rupees four lakhs fifty five thousand seven hundred and seventy four only), pertaining to the final dividend for the year 2007-08. Corporate Social Responsibility: Pursuant to Section 135 and Schedule VII of the Companies Act, 2013, read with the Companies (Corporate Social Responsibility) Rules, 2014, the Board has constituted the Corporate Social responsibility (CSR) Committee comprising of Mr. D. Ranga Raju, Chairman, Mr. Sudhakar Kudva, Mr. V.Vijay Shankar and Mr. N. Vijayaraghavan, members of the Committee. A detailed CSR Policy has also been framed which is placed on the Company's website. During the year under review the Company does not fall under the criteria of CSR Policy. Despite the non applicability as per the Companies Act, 2013, your Company does a lot of CSR activity in Srikakulam and Ethakota. These activities are centered on education and providing essential supplies to various villages. Change in the nature of business: There is no change in the nature of business of the Company. Significant and Material Orders passed by the Regulators or Courts. During the year the Company has not received any significant and material orders passed from Regulators or Courts or Tribunals impacting the going concern status and the Company's operations in future. Particulars of Loans, Guarantees or Investments under Section 186: The details of Loans, Guarantees, and Investments made during the financial year ended 31st March, 2015 in compliance with the provisions of Section 186 of the Companies Act, 2013 read with the Companies (Meetings of Board and its Powers) Rules, 2014 have been disclosed in the financial statements forming part of this Annual Report. Extract of Annual Return: The Extracts of the Annual Return in form MGT-9 as per the provisions of Section 92 of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014 is enclosed as Annexure-V to this Directors Report. Number of Board Meetings: During the year under review, six (6) Board Meetings were held during the year under review. The details of which are given in Corporate Governance Report which forms part of this Annual Report. The provisions of Companies Act, 2013 and the Listing Agreement were adhered to, while considering the time gap between two meetings. Audit Committee: The Audit Committee constituted comprising of Mr. D. Ranga Raju as the Chairman and Mr.Sudhakar Kudva, Mr. Raghuraman, Mr. Raghavender Mateti as the members. The details about Audit Committee including the brief description of its terms of reference are given in the Corporate Governance Report. Risk Management Policy: Pursuant to the provisions of Section 134, and other applicable provisions if any of the Companies Act, 2013, the Company constituted the Risk Management Committee and framed Risk Management Policy, which inter-alia covers implementation and monitoring of the risk management plan for the Company. The Committee is responsible for reviewing the risk management plan and ensuring its effectiveness. The details about Committee including the brief description of its terms of reference are given in the Corporate Governance Report. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. Meeting of Independent Directors: The details on the separate meeting of the Independent Directors and familiarization programme are reported in the Report on Corporate Governance. Related Party Transactions: All the related party transactions are entered into during the financial year were non-material and were on arm's length basis and were in the ordinary course of Company's business and are in compliance with the applicable provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement. The Company has not entered into any contract, arrangment or transactions with any related party which could be considered as material with in the meaning of Clause 49 (VII) (C) of Listing Agreement. Related party transactions under Accounting Standard-(AS)18 are disclosed in the notes to the financial statement. There are no materially significant related party transactions made by the Company with Promoters, Directors or Key Managerial Personnel's etc. which may have potential conflict with the interest of the Company at large. Thus the disclosure in Form AOC-2 is not applicable. Omnibus approval is obtained for the transactions which are foreseen and repetitive in nature. Necessary disclosures and the statement of all related party transactions is presented before the Audit Committee and the Board of Directors on a quarterly basis specifying the nature, value and terms and conditions of the transactions. The Related Party Transactions Policy as approved by the Board is uploaded on the Company's website at the web link: <http://www.nagarjunaagrichem.com/admin/products/> NACL_Related_Party_Transactions.pdf. The details of the transactions with Related Parties are provided in the accompanying financial statements. Vigil Mechanism/Whistle Blower Policy: The Company is committed to developing a culture where it is safe for all employees to raise concerns about any unethical, fraud and unacceptable practice and any event of misconduct adhere to the highest standards of ethical, moral and legal conduct of business operations. To maintain these standards, the Company encourages its employees who have concerns about suspected misconduct to come forward and express these concerns without fear or punishment or unfair treatment. In view of this the Company has formulated Whistle Blower Policy for the sake of employees and Directors to raise their concerns. The Whistle Blower Policy as approved by the Board is uploaded on the Company's website at the web link: <http://> www.nagarjunaagrichem.com/admin/products/NACL_ Whistle_Blower_Policy.pdf. Manner in which formal annual evaluation has been made by the Board of its own performance and that of its Committees and Individual Directors: Pursuant to the provisions of the Companies Act 2013 and Clause 49 of the Listing Agreement, the Board has carried out evaluation of a) its own performance, b) the Directors individually and c) working of its Committees. The manner in which the evaluation was carried out is reported in the Report on Corporate Governance forming part of this Annual Report. Nomination and Remuneration Policy: Pursuant to Section 178(3) of the Companies Act, 2013, the Company has adopted a policy on remuneration of Directors, Key Managerial Personnel and other employees. The Nomination and Remuneration Committee (NRC) has formulated the criteria for determining qualification, positive attributes and independence of Directors in terms of provisions of section 178(3) of the Act and Clause 49 of the Listing Agreement. The details about Committee including the brief description of its terms of reference are given in the Corporate Governance Report. Statement of Declaration given by Independent Directors under Sub-Section (6) of Section 149: The Company has received necessary declarations from each Independent Director of the Company under Section 149(7) of the Companies Act, 2013 and Clause 49(II)(D) (2) of the Listing Agreement that the Independent Directors of the Company meet the criteria of their independence as laid down in Section 149(6) of the Companies Act, 2013. Management Discussion and Analysis Report: Management Discussion and Analysis Report for the year under review, as stipulated under Clause 49(VIII)(D) of the Listing Agreement entered with the Stock Exchanges in India, is presented in a separate section forming part of this Annual Report. Policy on Sexual Harassment: The Company has zero tolerance for sexual harassment at workplace and has adopted a "Policy on Sexual Harassment of Associates" in accordance with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules made thereunder. The Policy aims to provide protection to employees at the workplace and prevent and redress complaints of sexual harassment and for matters connected or incidental thereto, and framed with the objective of providing a safe working environment, where employees feel secure. During the year ended 31st March, 2015 the Company has not received any complaints pertaining to sexual harassment. Brand Protections: Your Company has taken appropriate actions against counterfeits, fakes and other forms of unfair competitions / trade practices. Listing Fees: The Company has paid the listing fees for the year 2015-16 to the Bombay Stock Exchange where the equity shares of the Company are listed. Corporate Governance: The Company has complied with the Corporate Governance requirements under the Companies Act, 2013, and as stipulated under the Listing Agreement with the Stock Exchange. A separate section on Corporate Governance under the Listing Agreement, along with a certificate from the auditors confirming the compliance, is annexed and forms part of this Annual Report. Fixed Deposit: Your Company has not accepted any fixed deposits from the public during the year under review, and no such amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet. Industrial Relations: The industrial relations at the factories and head office continued to be cordial. Insurance: All the assets and insurable interests of your Company including inventories, buildings, plant and machinery, enactments are adequately insured. Particulars of Employees and Remuneration: The information required under Section 197(12) of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2015 is annexed as Annexure -III to this report. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo: Disclosures required under the provisions of Section 134(3) (m) of the Companies Act, 2013 relating to conservation of energy, technology absorption and foreign exchange outgo and earning, in terms of Rule 8 of the Companies (Accounts) Rules, 2014, are set out in a separate statement attached hereto as Annexure-IV and forms part of this report. Acknowledgement: Your Directors thank the Company's Bankers and the Financial Institutions for their help and co-operation extended throughout the year. Your Directors place on record their appreciation for the support and co-operation that the Company received from its Stakeholders, Customers, Agents, Suppliers, Employees, various Government / Non-Government Departments, Associates and Community in the vicinity of the plants. Your Directors also record their appreciation for the excellent operational performance of the staff of the Company that contributed to the achievements of the Company. The Directors also acknowledge with much gratitude, the continued trust and confidence reposed by the Dealers/Customers of the Company. Your Directors look forward to the future with confidence. For and on behalf of the Board K.S.Raju Chairman(DIN:00008177) V.Vijay Shankar Managing Director (DIN:00015366) Place : Hyderabad Dated : 07th August, 2015 |